Tankless Water Heater Pros And Cons

Tankless Water Heater Pros And Cons

Tankless Water Heater Pros And Cons

tankless water heater pros and cons

Tankless water heaters provide hot water on demand, making them more energy-efficient than traditional-style storage tank water heaters. Coldwater travels through the tankless unit and is heated using gas or electricity, providing a hot water supply that will last until you turn off the tap. Because of this, they are also known as instantaneous or demand-type water heaters.

Tankless water heaters are one of the newer tools for creating a more energy efficient home. Unlike standard units, which continuously heat and reheat water so that it is always hot, tankless heaters generate water warm instantly with high-powered gas burners or electric coils. Yes, this instant heating requires more power, but because the water does not have to be reheated again and again, like in a standard “tank” model, tankless systems use less energy overall. According to Consumer Reports, which studied these appliances extensively, gas-powered tankless water heaters are approximately 22% more efficient when compared to traditional water heaters. Is there a catch? Yes and no. In the right situation, a tankless water heater is the best option. However, it is a good idea to weigh the pros and cons of these relatively new systems before committing.

You’re taking a hot shower, shampoo in your hair, when suddenly the water begins to turn lukewarm. You rush to rinse, but now the water’s ice-cold and your shower is ruined. Tired of cold-shocking your body when you expect hot water? Well, there’s a way to avoid it, and save money and energy in the process: by installing a tankless water heater.

Tankless water heaters, also known as on-demand or instant water heaters, have many advantages over traditional tank-style water heaters and can be an excellent long-term investment.

But, like any product, they have their downsides and they are not the right solution for every home.

Unlike traditional tank-style water heaters, which continuously use energy to maintain a hot water supply, tankless water heaters only expend energy when you turn on a hot water tap or when you’re using appliances.

This on-demand style of operation results in their most significant advantage; energy and cost savings.

Besides energy and cost savings, there are several other reasons to choose a tankless water heater over a traditional tank-style heater. Tankless water heaters produce an endless supply of hot water, take up less space, have a lower risk of leaking, are safer, and have a significantly longer lifespan on average.

The main disadvantage of tankless water heaters is their upfront cost (unit and installation) is significantly higher than tank-style heaters. Including installation, tankless water heaters cost 3 times more than tank-style water heaters on average.

In addition to high upfront costs, tankless water heaters have several other disadvantages compared to tank-style water heaters:

  • they take longer to deliver hot water
  • the water temperature is inconsistent when multiple outlets are on simultaneously
  • they cannot provide hot water during a power outage

Investing in a tankless water heater is a difficult decision, so it’s important to understand all the facts before you make up your mind. In this article, I provide a comprehensive list of the pros and cons of tankless water heaters so you can make a well-informed decision based on your unique situation.

Flow Rate As A Key Performance Indicator For A Tankless Water Heater Pros And Cons Evaluation

The KPI that has to be studied here and is unique for water heater scrutiny, is the liquid flow rate.

Flow rate is the amount of water that a tankless unit can heat at a given time. It’s measured in Gallons Per Minute or GPM, the higher the GPG, the more water can be heated at the same time.

Bottom line— tankless water heaters come in many different sizes with some equipped to handle households that use a ton of water to smaller units built for low water usage.

It’s important to determine what you need for your household and buy the appropriate size heater. Just remember, if you run too many taps/showers/appliances at once and exceed the flow rate capacity of your water heater, the water won’t be hot.

The Bottom Line

Tankless water heaters have several advantages over traditional tank-style water heaters. They save energy (and save you money), they provide unlimited hot water, they’re small and compact, they never leak and don’t contribute to harmful metals in your water.

Best of all, they last twice as long as tank-style water heaters.

On the flip side,  you’ll have to invest around $3,000 upfront, they provide inconsistent water temperature in many situations, and leave you without any hot water during a power outage.

The best way to decide whether a tankless water heater is right for you is to audit your situation.

Here are some simple questions to ask yourself:

  • Do you have $3,000 to invest in an appliance that won’t provide a return on your investment for several years?
  • Is your house new construction or are you planning on staying in it for a long time (10+ years)?
  • Do you often run out of hot water due to several showers back-to-back?
  • Could you benefit from extra space in your basement (who couldn’t?)?

If you answered “yes” to one or more of these questions, a tankless water heater might be right for you. If you answered “no” to one or more of these questions, especially, question #1, you should probably hold off and stick with a tank-style heater.



The U.S. Department of Energy reports a tankless water heater is 24% to 34% more energy-efficient than storage tank water heaters—as long as you use around 41 gallons per day. However, even if you double that amount, they are still 8% to 14% more efficient. Even up to 50% energy savings is possible if you install a tankless water heater at every location where you use hot water. Compared to a storage-tank water heater, this is a huge improvement.

The Circle of Blue Energy department estimates that the average family consumes 64 gallons of water a day, costing between $400-$600 a year. Even if you’re conservative in your water usage, a tankless water heater can be up to 34% more energy efficient, saving about $80 to $100 a year.

An ordinary storage water heater has a reservoir of between 20 to 80 gallons of hot water that is heated all the time, but the water cools down if not used (no matter how well the tank is insulated), and this results in a loss of standby power. 

An electric tankless water heater can save you more money by only heating up water at the moment of usage and not having a start light on all the time.

New Energy Star certifiedtraditional storage water heaters are also on the market. Not only do these units offer monthly savings for a lower initial cost – they also qualify for tax credits. Additionally, homeowners do not have to make significant changes to their gas lines or electrical wiring, as nearly all homes are equipped to accommodate these traditional water heaters.

The main advantage of tankless water heaters is that they are energy efficient and save you money over the long term.

A tank-style water heater expends energy around the clock to maintain the temperature of a 40 to 50-gallon water supply so that hot water is ready when it’s needed.

Tankless water heaters, as their name suggests, heat water on-demand and do not maintain a supply of water.

By only heating water when it’s needed, tankless water heaters do not experience standby heat loss, which occurs when heat escapes the water tank and needs constant reheating.

When a tap, shower, or appliance is turned on, cold water passes through the tankless water heater where it’s heated by either a gas-fired burner or electric coils.

Once the water is heated (this happens in seconds), the hot water travels through the pipes and out the tap, showerhead, or any other outlet in your home.

Determination Of Energy Savings For Tankless Water Heaters

Your energy savings depends on the amount of water you use and the efficiency of your previous tank-style system.

According to the U.S. Department of Energy, tankless water heaters can be between 8% and 50% more energy-efficient than tank-style water heaters, but the actual efficiency depends on the amount of hot water you use.

If you use less than 41 gallons of hot water per day, a tankless heater is 24%-34% more efficient than a tank-style heater.

If you use a lot of hot water, around 86 gallons per day, tankless water heaters are only 8% to 14% more efficient since they are running more often.

If you install tankless water heaters at each outlet (shower/sink) instead of a centralized system for your entire house, you can save even more; between 27% and 50%.

Switching from a tank-style water heater to a tankless water heater will save a family of four an average of $100 per year or over $1500 throughout the lifetime of the system, according to Energy Star.

Longer Lifespan

Tankless water heaters can last 20 years or longer. This is significantly longer than the lifespan of a storage water heater (anywhere from eight to 15 years). If you are planning on keeping your home for a long time, buying a tankless water heater means you do not need to regularly purchase a replacement heater—a guaranteed way to save money.

A considerable advantage of tankless units is their longer lifespan. A standard, high-quality water heater will last roughly a decade, whereas tankless models function for twice as long. Opting for the longer-lasting tankless model can save a homeowner from needing a replacement every 10 years.

Elimination Of Energy Loss Due To Stand-By Status

The biggest selling point for tankless heaters is that they eliminate “standby loss.” Traditional units reheat water repeatedly, raising energy costs each time that they do so. Even if no one is home, the water heater is using energy because it is still firing up to reheat the water in its tank.

Tankless Water Heaters Occupy Less Size

Tank-style heaters take up floor space, usually in the basement, while tankless units are mounted to a wall like a circuit breaker and can fit in most closets.

Tankless water heaters are much smaller than bulky storage models. Installers usually mount them on a wall in an inconspicuous place in the basement. In smaller homes, the space savings is a welcome benefit.

To give you an idea of how tankless and tank-style water heaters compare in terms of size, the average 40 to 50-gallon tank-style heater is 54 to 60 inches tall with a 20-inch diameter and is shaped like a cylinder.

The average tankless unit is around 27 inches tall, 18 inches wide, 10 inches deep, and rectangular.

In this basement, you can see a tankless Rinnai that looks like a circuit breaker and a large storage-tank water heater. The tankless device occupies almost no space.

Anyone who has ever lived with the cylindrical tank of a normal water heater or heat pump in the house would be amazed at the size of these elegant boxes. A tankless water heater has a few models, like the Mini Tank, measuring around 14x14x11 feet, which can be placed even under a bench.

Not having a storage tank means tankless water heaters are small and thus, are a great option if you’re looking to free up space in your home, or if you have limited room.

If you have a smaller home and a modest demand for hot water, a tankless water heater is optimal. These efficient units will eliminate standby loss and will provide enough instant hot water for one, two, or three people to shower, wash clothes, and do dishes.

Different Sources Of Supply Available

Tankless water heaters are often powered by natural gas, but electric models are also on the market. Depending on a home’s electrical infrastructure, a non-gas unit may solve the issue of rerouting gas lines or investing in other pricey, labor-intensive alterations.

Tankless Water Heaters Have Almost No Risk Of Leaking

One of the biggest risks with tank-style heaters is, over time, minerals from hard water build-up within the tank which leads to corrosion and eventually leaks.

Since tankless water heaters don’t have a tank, there is no risk of leaks or flooding.

This doesn’t mean that tankless water heaters are immune to issues. They can and will run into problems that could result in leaking, but the chances of having a major leak that floods your entire basement and causes significant damage are slim.


Since tankless water heaters heat cold water to demand, it’s possible to have hot water indefinitely as long as you keep the tap running. While there are some limitations, in theory, a tankless water heater could let you take a hot shower for as long as you’d like without ever getting cold.

After flushing the cold water from the pipes out of the faucet, tankless water heaters can provide an unending stream of hot water almost instantly. Therefore, on a very basic level, these units can indeed deliver on their promise to supply heating without the inconvenience of bulky storage tanks.

In houses with heavy hot water usage, storage tanks will eventually run out of hot water (for example, if three or four people take showers in a row while the dishwasher is running). A tankless heater ensures that everyone has an equally warm shower – as long as they are taken consecutively, not at the same time – because it does not rely on reserved water to meet demand.

Since tankless water heaters work by heating water from the external source on-demand, you could take a shower for 10 hours (or longer), and the water would be as hot as it would be for a 10-minute shower.

Since they don’t have a reservoir, tankless water heaters heat the water as soon as you turn on the sink or shower.


Tankless heaters qualify for federal tax credits, which help offset the high cost of installation. In 2022, the federal government offered a 10% tax credit on the overall cost of purchasing and installing a tankless water heater.

Because they are more efficient, tankless heaters qualify for federal tax credits, which help offset the steep installation cost. Sice 2022, the federal government offered a 10% tax credit on the overall cost of buying and installing a tankless hot water heater. Energy Star-certified traditional storage heaters also qualify for the same 10% tax break.

Tankless Water heaters Are Operationally Safer

Tankless water heaters are safer than tank-style heaters.

Besides the fact that they don’t have a tank that could explode, they also provide more precise control over the temperature so you’re less likely to be burned by hot water.

Tank-style heaters break down over time due to hard water causing the inner lining of the tank to rust and corrode.

Those minerals and particles eventually make their way into your water lines and expose your family to harmful toxins.

Since tankless water heaters don’t maintain a supply of water in a corroding tank, the water they distribute throughout your home is more pure and safer on your skin.

No Risk Of Explosion Of The Water Tank

Today’s plumbing code requires all tank-style water heaters to have a temperature and pressure relief valve that opens to release pressure and eliminate the possibility of the tank exploding.

Over time, minerals and sediment from the water can clog up the valve and prevent it from functioning properly.

When this happens, a dangerous amount of pressure can build-up and put you at risk. If you have a tank-style water heater, experts recommend testing the valve at least once a year. 

Although it rarely happens, explosions are a serious risk with tank-style water heaters. Fortunately, since tankless heaters do not have a tank, there is absolutely zero risk of an explosion ever occurring. One less thing to stress out over.


As they have a long service life, tankless heaters usually have longer warranties. So if something goes wrong, the owner won’t have to pay for the tankless water heater repair or cover the replacement. Warranties go up to 20 years, which is the average life of one of these heaters.

Because of their lengthy lifespan, tankless heaters have longer warranties. Therefore, if anything goes wrong, the homeowner will not have to pay for repairs or foot the bill for a replacement. Warranties can run up to 20 years, which is the average lifespan of a tankless heater.



The Consumer Reports survey mentioned above names inconsistent water temperatures as one of the biggest buyer complaints. This issue typically results from the heater’s inability to send enough hot water to multiple outlets simultaneously.

In researching tankless water heaters you’ve likely come across the term “cold water sandwich”.

A cold water sandwich occurs when intermittent use of hot water causes you to feel an initial surge of hot water, followed by cold water, which quickly turns hot again.

When you turn the hot water off and on quickly, like you would when you’re hand-washing dishes, the pipes have hot water in them from moments ago.

The short delay between when the water starts to flow and when the heater kicks on causes a short burst of cold water before turning hot.

Difficulty To Establish A Lukewarm Temperature With A Regular Flow Rate

One of the lesser-known downsides of tankless water heaters is that they have difficulty achieving a lukewarm water temperature.

Since tankless water heaters need a minimum amount of water flow before activating, there’s a gap between completely cold water and the coolest warm water that you can create with a hot and cold water mix.

Not the end of the world since there are very few scenarios where you won’t be able to reach the temperature you need, but it’s worth mentioning if you’re the type of person that really enjoys cool showers.


Tankless water heaters provide a constant flow of hot water, but this is not limitless. Standard models heat several liters of water at once (great for a single person taking a shower or washing up), but if multiple faucets are on while someone else is taking a shower a tankless heater is not equipped to heat multiple outlets at once. 

A tankless water heater can only heat so much water at a time. If you demand more hot water than the unit can generate—for instance if you run the dishwasher, washing machine and shower at the same time—the temperature of the water will fluctuate, since the heater is trying to provide for all three locations at once. It is possible to work around this issue by installing more than one unit or using less hot water.

What does all of this mean?

Tankless water heaters supply a steady stream of hot water, but the supply is not unlimited. Standard models heat several gallons of water at once – perfect for a single person taking a shower or washing the dishes. But if an individual is running the dishwasher or washing machine while someone else is taking a shower (or two people are taking showers in two different bathrooms at the same time), a tankless heater is not equipped to keep up. A traditional water heater, which can store between 30 and 80 gallons depending on the model, will not have a problem providing hot water to multiple outlets at the same time.

A traditional water heater will have no problems supplying hot water to multiple outlets at the same time.


A water softener is usually necessary to ensure a tankless heater operates properly. Obviously, this extra equipment adds to the unit’s initial price tag. A softener will also negate the space-saving benefit, as the bulky softener (in addition to the necessary bags of salt) will take up space beside the wall-mounted heater. In fact, this appliance may actually take up more space than a traditional water heater.

A fabric softener will also negate the benefit of more free space, as a bulky fabric softener (in addition to the necessary salt bags) takes up space next to the mounted heater. In fact, this may take up even more space than a traditional water heater.


While month-to-month water heating costs are cheaper with a tankless unit, it could take years to make up for the high initial cost. Over time, a homeowner will likely come out ahead, but according to Consumer Reports, the energy savings for going tankless add up to $75 per year, on average. Therefore, it could take 6 to 12 years (or more) before the month-over-month savings cover the installation costs.

While monthly costs are cheaper with a tankless unit, it can take years to offset the initial cost. Over time, the owner will likely gain, but tankless energy savings average $75 per year. So it can take a few years before the monthly savings cover the installation costs.

Tankless Water Heaters May Take Longer To Provide Hot Water

Another downside to tankless water heaters is the fact that they take longer to generate and deliver hot water compared to tank-style heaters.

Remember, tankless water heaters don’t keep a supply of hot water ready to flow immediately when you need it.

When you turn on a hot water tap, the idle water in the pipes is cool or, at best, room temperature.

Once that cool water is flushed out, heated water comes through, however, it can take between a few seconds and a minute depending on the distance between the heater and the tap.

Tank-style heaters don’t produce hot water instantly either but since they have a supply ready to go and don’t need to kick on, it reaches the outlet more quickly.

Tankless heaters do not always turn on if the faucet is slightly open (when shaving or rinsing a toothbrush, for example).


A tankless water heater costs more upfront—both for the unit and installation—than a traditional storage tank water heater. While the expense may deter you at first, keep in mind that a tankless water heater—with its longer lifespan and energy savings—will pay for itself in just a few years.

Their longer lifespan makes tankless units inherently more expensive. The average traditional model costs around $500, while the cheapest tankless options start at $1,000. These specialized models are also more expensive cost more to install, so labor fees must be factored into the overall price tag.

The average unit cost for a tankless water heater is slightly higher for natural or propane gas models ($1,000 to $1,500) than electric models ($500 to $1,500).

Their longer service life makes tankless units more expensive, with the average traditional model costing around $500, while cheaper tankless options starting at $1,000. These models are also more expensive, cost more to install, so labor fees must be factored into the overall price.

Cannot Be Utilized With Power Outages

Because tankless water heaters, even gas models, need electricity in order to run and regulate, if the power goes out, then so does your hot water. If you live in an area prone to outages, a tankless water heater may not be the best choice.

Tankless water heaters can be powered by gas or electricity but even gas-powered tankless water heaters rely on an electric control panel to operate the system.

So, regardless of the type of tankless water heater you have, you’ll be out of hot water in the event of a power outage.

This is an area where tank-style water heaters have a significant advantage over tankless. Regardless of the power source, the water stored in their tank will remain hot for several days.  

Higher Installation Costs Of Tankless Water Heaters

Gas models cost around $1,000 to $1,500 to install; electric models may be less at $800 to $1,500. Expect to pay a professional plumber around $45 to $150 per hour depending on the complexity of the installation. Note that many models of tankless water heaters will qualify for a 10% federal tax credit, which may help offset the cost.

The biggest downside of tankless water heaters by far is the high upfront cost of the unit and installation.

According to HomeAdvisor, the average cost of a 40 to 50-gallon tank-style water heater including installation is $889. The average cost of a tankless water heater including installation is $3,000.

Tankless water heats are more expensive primarily due to higher installation costs. Often times, special wiring needs to be installed in order to handle the increased load and/or a new vent pipe needs to be installed.

Also, since tank-style heaters have been around longer and are more common, more professionals are capable of installing them and the labor costs are lower.

Additionally, hard water (water containing high levels of minerals) can cause tankless water heaters to work harder and eventually break down.

Due to this risk, some manufacturers require that you also install a water softening system, or the warranty is voided. Installing this additional component adds to the overall cost.

As mentioned above, tankless water heaters require a non-traditional setup, making installation more expensive. A contractor might even be forced to reroute a gas line or add new venting, adding to the overall cost of the project.

The installation of a tankless water heater should always be done by a professional. If you are replacing a storage tank system, your house will likely require some modifications in order to accommodate the new system. In many places, there are codes that must be met and permits acquired before you can install your new heater. Hiring a professional will not just ensure that your heater is properly installed—it will also guarantee that your chosen model is compatible with your home and location.

Require More Maintenance In Some Models

Tankless water heaters require maintenance at least once a year. Over time, minerals build up inside the water heater, meaning the entire system must be flushed in order to prevent damage or a loss of efficiency. If you live in a place with hard water, consider flushing at least twice a year. This maintenance routine is essential to keep your model in good shape, especially since most warranties will not cover damage from mineral build-up.

Other routine maintenance and care tasks include cleaning the air filter and the water filter. Check your instruction manual to determine how often you should clean these filters, since they vary by model. Usually, a cleaning every four to six months should be sufficient. Similarly, dust and wipe the outside of your tankless water heater to prevent dirt accumulation—and at the same time, check for leaks, rust or any other damage.

While all of these maintenance tasks can be performed on your own, if you find significant damage or notice anything worrying, turn off the power to your machine and contact a professional plumber immediately.

To keep the warranty valid, owners must perform annual maintenance and, perhaps, run a water softener. Homeowners should also flush out their system annually to prevent mineral build-up in the heater or water line. The cost of performing these tasks could counteract some of the savings produced by the lower energy requirements of a tankless heater.

Top Brands

There are many tankless water heater manufacturers and brands. When shopping, look for an Energy Star rating—a government-certified rating that means the model is within the top 25% for efficiency among all models manufactured.

  • Rinnai: Rinnai is the most popular tankless water heater manufacturer in North America. They only produce gas models, but all are capable of heating water for a standard-sized home.
  • Rheem: Rheem is known for producing reliable, well-priced gas and electric units that are easy to install and maintain.
  • Noritz: As the first-ever manufacturer of tankless water heaters, Noritz produces a wide variety of gas models at a range of price points.
  • Stiebel Eltron: A world-renowned German manufacturer. They produce gas and electric models that are efficient and compact.
  • Bosch: Bosch is known for its highly rated electric models. They produce gas models as well.
  • Takagi: Recently introduced into the U.S. from Japan, Takagi only offers gas-based models, usually at lower price points than the rest of the industry.

Bottom Line

If you’re looking for a way to save money long-term, improve your home’s energy efficiency and don’t mind making an expensive investment upfront, a tankless water heater will meet all your needs and more. It’s a great long-term purchase for your home that will leave you wondering why you didn’t make the switch earlier.

Ready to make the switch? Contact a local contractor to install your tankless water heater and request a free quote!

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BY M. Kogan

Hello, I am Marcio. I am an architect and designer, alma mater is Mackenzie. Retired in theory, but an architect never retires completely. Along with architectural projects, I am a filmmaker and have completed some short documentaries. Filmmaking and design are my passions. In HomeQN I write about home decoration and foundations. The goal is to teach homeowners to DYI as much as possible, and when this is not possible, enable them through knowledge, to evaluate service quotations and choose the best service technicians.

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